Originally posted at Herring Consulting Company Blog
Whether solar panels increase home value depends on several factors. There are a wide array (pardon the solar pun) of factors to consider when tasked with solar photovoltaic (PV) system valuation.
Financing is one of the major issues a REALTOR® or an appraiser must understand about residential solar power before trying to value a PV system on any type of property. Is it a lease, power purchase agreement, solar loan, pace loan (which may nullify the ability to finance a home on the secondary market as they can stand in the first mortgage position), or cash purchase? All require different handling by appraisers.
If the ownership allows the solar photovoltaic system (PV) to be valued as real property then all of the physical factors (number of PV arrays, size of arrays, brand, efficiency, azimuth of the panels, compass bearing of the panels, and amount of sun hours) come into play along with any whole house batteries and the warranty of the solar systems.
Demanding great consideration is the local cost of power which is crucial to estimate the energy savings cost over the life of the PV system. This can provide support for an increase in the value of the property based on the discounted energy savings over the life of the panels using PV Value
The other typical approaches to value (using sales of similar homes that have with solar measured against similar homes without and the cost approach for replacement of the solar amenities) can also help. Right now, solar is a complex issue and very few agents or appraisers have the most current education to value it properly.
As a listing agent you maybe trying to figure out whether solar panels increase home value. If you are dealing with a property with a solar photovoltaic system, there are specific questions you should ask the property owner to be sure you document all the details correctly. You can find them on the top portion of page 3 of the Appraisal Institute’s Residential Green and Energy Efficient Addendum.
You should also make sure the appraiser you are dealing with has had the training and classes to properly value a solar photovoltaic system. They should be familiar with this addendum and have training on using the PV Value website. If you have a report completed by an appraiser who does not mention these industry standards we may be able to help you document what should have been addressed in the appraisal report.
If you have any questions on where to start on documenting solar reach out to us. We have both the training from the national experts on valuing solar and experience valuing and helping agents document these improvements for their listings.
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